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August 13th, 2013

Homebuyers not deterred by higher mortgage rates

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6-Fannie-Mae-logoConventional wisdom says higher mortgage rates tamp down home-buying activity. But so far, that wisdom hasn’t panned out during the current housing recovery, judging by a new Fannie Mae survey of consumer attitudes and expectations.

Instead, consumers have “taken the interest rate rise in stride,” Doug Duncan, chief economist of Fannie Mae, said in a statement.

“Expectations for continued improvement in housing persist, and sentiment toward the current buying and selling environment is back on track from its dip last month. These results are consistent with our own analysis of previous housing cycles, which finds that interest rates and home prices are not strongly correlated.”

Consumers expect mortgage rates, prices to rise

Here are some of the survey’s key findings:

  • 62 percent of consumers surveyed said they expected mortgage rates to rise during the next 12 months. That percentage jumped 5 points from the prior month to the highest level in the survey’s three-year history, Fannie Mae said.
  • 53 percent of consumers surveyed said they expected home prices to rise during the next 12 months. That figure was 4 percent higher than the June level.
  • Consumers expected home prices to rise 3.9 percent, on average. That expectation increased slightly to match the highest level, previously recorded in May.
  • Only 6 percent said they expected prices to drop, the lowest level the survey has ever recorded.
  • 74 percent of consumers surveyed said now was a good time to buy a house. That figure increased slightly from the prior month.
  • 40 percent said now was a good time to sell a house. That percentage increased 4 points and also matched the highest level the survey had ever recorded.
  • 45 percent said they thought it would be easy for them to get a mortgage today. That proportion dropped 2 points compared with May.

Household outlook less hopeful

One sour note was that the share of respondents who said they’d buy a home if they moved decreased slightly to 64 percent.

Consumers also were less sanguine about their personal financial situation:

  • 43 percent of those surveyed said they expected their own situation would improve during the next 12 months. That figure dropped 3 percent compared with the prior month.
  • 26 percent said their household income was significantly higher than it had been 12 months ago. That proportion held steady, Fannie Mae said.
  • 30 percent said their household expenses were significantly higher than they were 12 months ago, a decline of 6 points compared with the prior month.

The monthly survey polled 1,000 homeowners and renters via live telephone interviews in July. Respondents were asked more than 100 questions used to track their attitudinal shifts over time.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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